Using Panel Data to Test for Fiscal Sustainability within the European Union
AbstractMost empirical evidence suggests that the sustainability hypothesis, stating that government revenues and expenditures should cointegrate with a unit slope on expenditures, does not hold within the European Union, a finding at odds with many theoretical models. This paper argues that these results can be attributed in part to the use of inappropriate time-series techniques, and that the use of panel data can generate more accurate tests. By using newly devised panel unit-root and cointegration techniques it is shown that the sustainability hypothesis cannot be rejected when applied to a panel composed of 15 European countries between 1970 and 2004.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 65 (2009)
Issue (Month): 2 (June)
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Web page: http://www.mohr.de/fa
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
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- Auteri, Monica & Costantini, Mauro, 2010. "A panel cointegration approach to estimating substitution elasticities in consumption," Economic Modelling, Elsevier, vol. 27(3), pages 782-787, May.
- Niklas Potrafke & Markus Reischmann, 2012.
"Fiscal Equalization Schemes and Fiscal Sustainability,"
CESifo Working Paper Series
3948, CESifo Group Munich.
- Niklas Potrafke & Markus Reischmann, 2012. "Fiscal Equalization Schemes and Fiscal Sustainability," Ifo Working Paper Series Ifo Working Paper No. 141, Ifo Institute for Economic Research at the University of Munich.
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